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August 1, 2007

Extremely Happy Feet: Disney Acquires Club Penguin For Up To $700 million

Michael Arrington

49 comments »

Club Penguin, a social network/virtual world that has been on the market for some time, was acquired by The Walt Disney Company and announced today. An earlier deal with Sony fell apart over valuation and Club Penguin’s policy of donating a substantial portion of profits to charity.

The company, which launched in October 2005, has 700,000 current paid subscribers and 12 million activated users, primarily in the U.S. and Canada.

The WSJ says the purchase price is $350 million in cash. Disney could pay up to another $350 million if certain performance targets are reached over the next couple of years, until 2009.

We mentioned Club Penguin a couple of months ago when a competitor launched from IAC called Zwinktopia. The company is killing it - projected revenues of $65 million in 2007 with $35 million in profit. Having nearly 50% bottom line margin is exceptional.

I recently spoke to an exec of one of the companies that took a long look at Club Penguin before deciding to pass. They said the charitable donations were a big factor in passing. He also mentioned that much of the success of the company was driven by movies such as Happy Feet. How much longer are penguins really going to be the cool thing, he wondered.

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Comments

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  1. Garth

    August 1st, 2007 at 2:42 pm

    One thousand dollars per user. Wow.

    Here’s an offer to any budding virtual world makers out there. Pay me $500 and I will subscribe to your service. You will come out ahead in the end.

  2. Jono

    August 1st, 2007 at 2:48 pm

    Dear GOD! I must be in the wrong business!

  3. trade games GURU

    August 1st, 2007 at 2:56 pm

    Garth,

    that’s not a bad idea! you could probably get away with paying $50 for people to join then REALLY clean house when you sell!

  4. Alaska Miller

    August 1st, 2007 at 3:24 pm

    It’s only $500 a user. Then another 500 as incentive to maintain or increase their user base.

  5. John

    August 1st, 2007 at 3:30 pm

    I’ll admit I’m not looking too close at the subscriber numbers, but I think it’s still a good deal for Disney. Disney pays $350 Mil and gets most of that back in projected profit over 5-7 years. Disney gets a team that knows how to build a successful MMORG aimed at tweens. Disney Interactive’s ability to shift resources can help the Club Penguin team start up a Club Teddy Bear (or what ever the next trendy animal is) faster than either party could have done by themselves. Best of all Disney now has a social network/mmorg for every age of internet user. It starts as young as 2 years old with Disney Playhouse Online and goes, Club Penguin, Toontown Online, Disney XD, Virtual Magic Kingdom, and Pirates Of the Caribbean. Look for a Princess or Fairy themed MMORG to capture the audience of Club Penguin as they mature out of it’s age group.

    -John
    http://www.thedisneyblog.com

  6. whoopie

    August 1st, 2007 at 3:39 pm

    congrats to the little penguins for finding the dumbest money in the room and poaching it

    and for john, do you honestly think two year olds use “social networking”???? they just learned to walk. reel in the enthusiasm a bit there dude.

  7. Alaska Miller

    August 1st, 2007 at 3:46 pm

    Do cats and dogs use social networks? No. But their human owners / parents sure do.

  8. god

    August 1st, 2007 at 3:48 pm

    dammit, where was I?

  9. biz.inc

    August 1st, 2007 at 3:54 pm

    lol - it’s a cute site, it sells.
    i’m looking at screenshots of it, i’d like to join - but it’d look pedophilia for someone other than a kid to join

  10. mark

    August 1st, 2007 at 3:58 pm

    I wonder if imbee.com will be next? Disney has already invested in them. Social networking for kids. Who knew?!?!?

  11. Marty

    August 1st, 2007 at 4:00 pm

    This is a smart move by Disney.

    http://martysmind.net/2007/08/.....isney-duh/

  12. Tim

    August 1st, 2007 at 4:07 pm

    USD 700m divided by 12m registered users equals USD 58.33 per registered user.

  13. Dallas Freeman

    August 1st, 2007 at 4:14 pm

    Social networking begins right from the early stages of life, traditional it started from playing Catch n Kiss in pre-school/kindy.

  14. Craig Baker

    August 1st, 2007 at 4:37 pm

    My wife did a review on club penguin just last week, http://louisemartinbaker.com/2.....in-review/

    If it has my wife hooked it must be good.

  15. John

    August 1st, 2007 at 4:44 pm

    It’s not Facebook or Myspace, it’s a movies and merchandise deal.

  16. Matt

    August 1st, 2007 at 4:45 pm

    Tim: Yes, $58.33 per registered user but what you really want to look at is the number of active users rather than registered users. Registered users is fairly (though not completely) meaningless except to press agents. The number of active users is somewhere between 700k and 12 million. Guesstimate: 2-3 million.

  17. David Mackey

    August 1st, 2007 at 5:02 pm

    Wow. That is a lot of cash…Especially for a site most of us have probably never heard of before.

  18. Louise

    August 1st, 2007 at 5:02 pm

    Club Penguin is fabulous. My daughter loves it and I have been known to secretly sign into my daughter’s account ot play ‘Astro Barrier’. Great fun!

  19. trade games GURU

    August 1st, 2007 at 5:03 pm

    if you build it they will buy it! :)

  20. trade games GURU

    August 1st, 2007 at 5:05 pm

    however…not many startups can boast $35 million in PROFIT a year.

    350million is actually the correct amount based on the old x10 profits buyout model.

  21. Anthony

    August 1st, 2007 at 5:20 pm

    With a 5, 7, and 9 year old, Club Penguin is all the rage with each of them and their friends at school. It’s safe (you can’t type free form), it’s fun (lots of games and things to explore), and they love playing together (rare with the age mix). It’s a great move for Disney and a good deal. Now if they only worked on their VMK site - that social networking site is horrible!

  22. AjaxJones

    August 1st, 2007 at 5:23 pm

    It certainly has the right parts to hook the kids into but it seems to have a life cycle before they move on to other sites.. Still with the protected servers with the limited chat to stop the Paedo’s in there talking to the very young kids it seems well set up. Membership is very steep as well , I spend a fortune to keep my kids in puffles.

  23. mainstreetreporter

    August 1st, 2007 at 5:46 pm

    If Louise’s experience is the norm, Moms becoming kids again to secretly play Astro Barrier at Club Penguin … no wonder this site is a money maker. Kids happy, Mom and dad happy (and they have the money), Disney now happy. Everyone’s happy!!

    And what’s not to like about penguins?? I petted one during an Artic tour at SeaWorld in Orlando. It was fabulous. Warning: they squirt poop in a backward horizontal stream. Stay in front …

  24. WTL

    August 1st, 2007 at 7:07 pm

    $60M revenue & 50% profit margin … which means their cost is $30M …

    What kind of cost does Club Penguin have? Server & bandwidth costs $30M? They don’t seem to be doing ad/marketing campaign at all …

    Would anyone know?

  25. bob cobb

    August 1st, 2007 at 7:44 pm

    Impressive numbers. You can only assume that they will grow as well, so seems like a good move for disney.

  26. sc

    August 1st, 2007 at 8:15 pm

    Forgive me for being dense, but what is the source of revenues ? Subscriptions, ad revenues or sale of virtual stuff?

  27. Anand Nalya

    August 1st, 2007 at 10:26 pm

    First we had ‘Happy Feet’ and now this news about this Disney - Club Penguin deal. Penguins seems to be popular among kids and their parents :)

  28. Doug Mehus

    August 1st, 2007 at 10:35 pm

    This is awesome news for a company based in my hometown and current residence of Kelowna, BC! Interestingly, it’s also among the biggest buyouts of Kelowna-based companies, perhaps the second-largest ever eclipsed only by Freightliner’s buyout of Western Star Trucks. Even Sysco’s buyout of HRI Supply was smaller. This is huge. :)

    Cheers,
    Doug

  29. Saïd Amin

    August 1st, 2007 at 10:58 pm

    wow, good for them! i heard that they all headed to a pub after the deal was finalized, *burp* sweet. party o =)

    i bet that adultfriendfinder.com founder andrew conru dreams of a similar valuation in a buyout…dreaming is the first step to self actualization.

    life is good.

  30. legoless

    August 2nd, 2007 at 2:58 am

    CP & Disney are working together. Disney havent bought it!

  31. Ed

    August 2nd, 2007 at 6:47 am

    If you don’t have kids btwn 7-12, then you may not know about this site. But, until not too long ago it was the big thing with my kids. They still visit it, though not as much since they’re always involved with many things. But, here’s a post I had shared with friends about Club Penguin:

    http://videosmom.typepad.com/v.....he_ne.html

  32. Gilou

    August 2nd, 2007 at 6:51 am

    $700M for a virtual penguin world…only in the US!

  33. The Musicians Network

    August 2nd, 2007 at 7:11 am

    Penguins? Cool? …Linux?
    They will always be cool in my book.

  34. nbc

    August 2nd, 2007 at 7:32 am

    I have to tell you, my daughter is now 2yrs-7mths, her first movie theater experience was Happy Feet almost 8mths ago now. She still talks about it and recognises all the imagery, music, the lot - Club Penguin is right up there with Ronald McDonald!

    I don’t know how they do it but that stuff is gold, scary but gold.

  35. James Thomas

    August 2nd, 2007 at 8:05 am

    As a developer for Disney Internet Group, I can only say one thing…

    Who doesn’t love penguins?? :)

  36. Ria Day

    August 2nd, 2007 at 8:52 am

    We are guessing that there will be a mad rush for the other kids sites now like Webkinz and Habbo.

    http://www.bizorigin.com/2007/.....eens-rule/

  37. Kevin Bartus

    August 2nd, 2007 at 10:36 am

    Tying Club Penguin’s success to Happy Feet is ridiculous. The site pre-dated and post-dated the movie by a long shot.

    Anyone with kids will tell you (a) the site is great, safe fun and (b) kids get tired of it pretty quickly.

    Kids change peer groups damn near every year, and Club Penguin dies like Friendster not because of a movie, but because people move on.

    Of course, like aging rock stars, has-been web sites like Friendster are apparently big in Japan. Which you’d think would be a natural for the Tamagotchi-like Club Penguin.

  38. Scott Schiller

    August 2nd, 2007 at 11:04 am

    Kelowna, eh? Not bad. When I hear about a start-up in Vernon getting bought out, it’s time to head back home and retire. ;)

  39. Ed

    August 2nd, 2007 at 2:49 pm

    @38. I agree, my kids barely use it nowadays. Club Penguin was used alot during the winter season to chat with friends and cousins. But, in addition to the change in peer groups, they prefer doing sports and other activities during the other seasons (Spring through Fall). However, there’s the Disney marketing machine. I’m sure they’ll make a big push on the Disney Channel, which is popular with tweens.

    @37 It will be interesting to see anyone going for Webkinz especially.

  40. Tuxee5

    August 6th, 2007 at 7:07 am

    hey cp lovers look im tuxee5 and im here to help have you ever wanted to have 999,999,999 coins before and not have to earn them or have all the clothes ever pruduced or be a free member well heres what i can do if u are a member e mail me at Wsoccer20@aol.com and ill get u free membership the coins and the clothes if your a non member i can get u the coins o but waith theres more if u are the first nonmember to email me u will also get the clothes and member ship if u are the first member to e mail me i will give u an additional 999,999,999 coins and sneak peaks at the new mission and the new clothes catolog for september so no matter if your a member or not email and you will get lods of stuff and have a blast ps I AM NO HACKER I DO NOT BAN I HATE ALL OF THOSE PEOPLE THEY AR ONLY A BUNCH OF #$@$##*^E(^%#$@#$ AND ^%&$^%@%@*&*(_&%&*$% so remember e mail me at Wsoccer20@aol.com and if your first you win even more WADLLE ON

  41. Nick

    August 18th, 2007 at 1:52 pm

    First of all, tuxee5, do not spam a mature and intelligent discussion with all your ‘ZOMG I KIN HACK FER U!!!!!!’ talk. It’s not needed.

    A very shrewd business move by Disney. I believe Club Penguin’s success can be traced back to when it was first advertised on Miniclip.com back in March last year. I would guess that a very large proportion of its userbase found out about it by logging on to Miniclip, where it has remained as the most played game for about a year now. Both companies will be able to prosper as a result of Disney’s investment.

    The best thing about Club Penguin is that it is fun to play for children and adults of all ages, as shown by the comments from other people here. It is incredibly safe compared to other social nextowrking sites, because you, the parent can control what your child says and/or does.

    sc: Club Penguin generate all their revenue through subscription (which are $6 per month) and the sale of online merchandise. They make no money through on site advertising, as the money from subscriptions cancels the need for that.

    As for the idea that Club Penguin will go out of fashion; it’s been going strong since October 2005, so you would expect it to keep going strong, but then again, who knows what the future will bring…

  42. Mike Jones

    August 19th, 2007 at 5:27 am

    Dude, You are so wrong! Movies and Hollywood are history. The internet and Miniclip.com are the new Hollywood. The Internet drives trends now not the the old timers and their tired, non interactive movies.

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